Buying your home as an investment is a '1990s mentality'

Business Insider | 8/9/2017 | Jeff Brown, U.S. News & World Report
lhumara (Posted by) Level 3
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• Historically, Americans have been told that buying a home is a good investment.

• However, post-2008 housing crash, would-be buyers are smart to question this assumption.

New - Homebuyers - Rate - Return

• New homebuyers can't assume a strong rate of return.

• That doesn't mean no one should buy a house — just that their primary motivation shouldn't be investment.

Crisis - Years - Investors - Wounds

With the financial crisis nearly 10 years past, most investors are done with licking their wounds.

The stock market has long since recovered and has set record after record. The economy is generally sound, unemployment is down and inflation modest.

Homes - Americans - Home - Investment - Wealth

But what about homes? Americans were long told the home was a key investment, essential to building wealth and getting into the middle class, or staying there. But many were hit hard by the housing crash that left tens of millions owing more than their homes were worth. Is a home a good investment, or should we have learned a hard lesson?

"Homeownership is not an investment," says Mark Avallone, president of Potomac Wealth Advisors in Rockville, Maryland. "It is a lifestyle choice for those wanting the freedom of owning your own home and land. People who assume a strong rate of return on their home purchase are living with a 1990s mentality. Sure, there will always be pockets of opportunities, but net increases in value are far from certain, especially when all the costs are included."

Time - Homeownership - Aaron - Hendon - Realtor

Over time, homeownership has worked well, but only for those who were sensible, says Aaron Hendon, a Realtor with Christine & Co. in Vashon, Washington.

"Don't speculate with the house you live in," he says. "Buy within your means, buy where you want to live, buy slow, buy smart, and know that, over time, the housing market has been as stable of a vehicle for growth as any."

Paper - Housing - Market

On paper, the housing market has indeed recovered. The...
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